Introduction to the Law of Double Taxation Conventions

S. 568. Taxes covered

8.1. Taxes on income

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The OECD Model covers taxes on income and on capital. The manner in which they are levied is irrelevant. The taxes must be imposed on behalf of a contracting state or of its political subdivisions or local authorities. The OECD Model provides for a general definition of taxes on income: all taxes imposed on total income or on elements of income, including taxes on gains from the alienation of movable or immovable property, as well as taxes on the total amounts of wages or salaries paid by enterprises. For the qualification of a tax as tax on income or capital the whole structure of the tax is important.

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DTCs regularly contain an exemplary list of taxes on income to which the treaty is applicable. When DTCs are patterned after the OECD Model, this list is found in Art. 2(3) and is introduced by the following sentence: “The existing taxes to which the Convention shall apply are in particular: …”. The use of the term “in particular” clarifies that the list is not exhaustive but merely serves to illustrate the general definition found in Art. 2(1) and (2) OECD Model. The treaty remains applicable even if one country stops levying a certain tax which i...